Economy: Here’s the good news

IN THE 2018 National Budget presentation, Finance and Economic Planning Minister Patrick Chinamasa indicated the economy would grow by 4,5 percent. He remarked, “Our economy has not been performing to its potential and to the expectations of the citizenry as demonstrated by low production and export levels and the resultant prevailing high levels of unemployment; and a continuing deterioration in macro-economic stability.

“This is notwithstanding our various economic blueprints for the economy to realise sustainable growth, development and poverty-eradication.

“The unsatisfactory performance of the economy is being underpinned by declining domestic and foreign investor confidence levels against the background of policy inconsistencies in an uncertain and uncompetitive business environment.”

However, indications on the ground reflect huge potential to exceed GDP growth of 4,5 percent if interventions and growth impediments highlighted below are attended to.

Exports Exports are the biggest source of liquidity and a huge stimulant of economic growth.

Increasing export earnings by 22 percent in the first half of 2018 is possible.

It is also possible to increase these earnings by 27 percent in the second half of the year.

For an economy that has experienced negative balance of payments for years, pushing export earnings to between US$5,5 billion and US$6 billion in 2018 is no pipe dream.

With agriculture projected to grow by 10 percent, resultant crop yields will mean surplus and, in turn, an export opportunity.

In addition, mineral exports can reach US$2,8 billion in 2018.

Given the prevailing global prices of and demand for minerals in 2018, it is possible to achieve this figure.

Monetary authorities must review export incentives and foreign currency allocation, ensuring exporters get a proportionate share relative to their earnings.

The five percent export incentive on bond notes has been overtaken by market developments.

A more realistic foreign currency retention scheme should, therefore, be worked out with exporters.

Schemes tend to work well where stakeholders have been consulted and take ownership.

Manufacturing At the end of 2017, the growth of this sector was a mere 1,1 percent. Capacity utilisation remains low and the projected growth rate of 2,1 percent in 2018 can be exceeded if the following are urgently addressed:

Transparency and fairness in foreign currency allocation;

Implementing support measures through duty-free importation of selected capital equipment and raw materials. This will minimise cost of inputs in the offtake stage of 2018;

Labour reforms to bring wages in tandem with affordability and productivity;

Eliminating unnecessary licensing, documentation and bureaucratic procedures;

Speedy licensing of special economic zone operators. This project has been disappointingly slow, and it has been years of talking with no licensing; and Unveiling lines of credit and affordable finance to productive sectors. This time, there must be measures to ensure beneficiaries pay back.

Competitive advantage

We have low-hanging fruits due to natural endowments and favourable climatic conditions.

Tourism will grow in 2018. You will not get the Victoria Falls anywhere else in the world.

The same applies to the panoramic views of Nyanga; in addition to Zimbabwe’s vast game parks.

However, our costs on items such as departure and visa fees and VAT for foreign guests remain very high and uncompetitive.

As a result, we have lost business to destinations like Zambia and South Africa.

We have over 40 marketable minerals and the new political dispensation offers a wonderful opportunity for investments in mining.

Like in agriculture, opportunities exist for value chain activities and beneficiation.

Consequently, activities in these areas will lead to job-creation.

Public sector Public enterprises must now contribute at least 25 percent of GDP by year-end. Government should speed up ongoing public sector reform by implementing the following:

Closing non-functional and insolvent parastatals;

Allowing those with commercial activities to operate as public companies; and Enforcing measures for local authorities to dedicate 60 percent-70 percent of revenue to development and not consumption;

Let’s all join hands and say goodbye to corruption, economic decadence and unproductive activities.

Welcome 2018 — welcome economic growth under the new political dispensation! Zack Stan Murerwa is an economist and consultant based in Harare. He wrote this article for The Sunday Mail